Next week’s economic reports presented by Fawad Razaqzada, Market Analyst, Forex.com....
Hindsight on GDP Has Value on Wall Street
12/21/2010 5:23 pm EST
No holiday from economic data this week.
The morning of Wednesday, December 22, brings what’s called the final revision of third-quarter US GDP growth estimates. (We’ll get the final, final figure in 2011.)
The previous estimate came in at 2.5% growth, itself an increase from the first estimate. Economists project that Wednesday’s revision will bring the growth rate up to 2.8% for the quarter that ended in September.
Why are the practitioners of the dismal science confident of an increase in the growth rate?
Let me count the reasons: More confidence from purchasing managers surveys, a strong upward revision to September retail sales, and higher-than-expected growth in US exports.
Even though Wednesday’s numbers are a revision of past data, they will have an influence on stocks going forward. An increase in third-quarter growth to 2.8% will add to optimism on Wall Street about growth in the fourth quarter and for 2011. In the aftermath of the extension of the Bush tax cuts, Wall Street economists have been busy raising their estimates for 2011 growth to 3% or even 3.5% for the year.
It would take at least a modest surprise from third-quarter GDP growth to move up those figures for 2011 again, but 2.8% growth would confirm the optimism behind those projections for 2011. And that would be worth something to US stocks.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. For a full list of the stocks in the fund as of the end of November, see the fund’s portfolio here.
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